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December 16, 2013

GBTA: Why Travel Taxes are Bad for Business

Last week, the GBTA looked into the rising taxes that both local municipalities and the federal governments are imposing on travelers. Joseph Bates, vice president of research at GBTA, told International Meetings Review that these added costs could have long-reaching effects for American businesses.

“The first discriminatory travel taxes aimed at business travelers date back to 1970s and ’80s,” Bates said, noting that the practice didn’t really begin to take hold until the following decade. Looking to avoid raising property taxes, local governments sought out alternative sources of revenue, and found that charging travelers extra to stay in town kept money coming in and kept local taxes down. 

“Since then, there has been a steady increase in taxes and fees aimed at travelers,” Bates continued.  Taxes on travel-related services increased the total tax bill for travelers by 58 percent in 2013, and seem poised to go yet higher with the proposed increase of  "9/11 Aviation Security Fee" from $2.50 to $5.60 per flight next year. 

When travel fees and taxes add up to make the overall cost of travel prohibitive, Bates explained, companies will avoid letting employees go on business trips. “This isn’t about companies that have 10 employees,” he added. “If they’re charged an extra $5 per trip, it’s not a big deal. But some of our members have 10,000 employees traveling per year. Multiply that $5 by 10,000--that’s big money. It’s real concern. And it could be a job-killer.” 

RELATED: GBTA Research Digs Into U.S. Travel Taxes

If the federal government passes the Aviation Security Fee, Bates believes that many larger businesses will reduce hiring in order to compensate for increased costs. If large companies have 10,000 employees who take eight or 10 trips per year, increasing the cost of a flight can cost them hundreds of thousands of dollars in extra fees. “That can mean 10 positions they can’t fund otherwise,” Bates said. “This could hamper their ability to expand their staff, and it will hurt the economy.”  

Bates was quick to add that the GBTA is not opposed to taxing travelers in order to make improvements that those travelers can use--for example, levying a tax on hotel rooms in order to fund a convention center renovation. “If a CVB can benefit from a tax on travelers, that makes sense to us,” he added. But many of these taxes are used for general services, and Bates says that local governments are balancing their budgets on the backs of travelers. “We can’t solve every locality’s budgetary problems,” he acknowledged, “but don’t tax the people who can’t vote in your district.” 

The increased costs, Bates added, do not seem likely to make businesses opt for large-scale “virtual meetings” instead of face-to-face ones.  “So far, virtual meetings have been limited to internal [purposes],” he said, rather than conferences and conventions. Corporate travel planners, however, may see a downturn in businesses if companies decide to send employees on fewer trips, or may have to take on more responsibilities if hiring is slowed. “This can reverberate in many places throughout any company,” he said. 

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